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McSurance that’s worse than nothing

Sen. Jay Rockefeller chaired a commerce committee hearing this week on the topic, "Are Mini Med Policies Really Health Insurance?" That question answers itself. • With payout ceilings of $25,000, $10,000, $5,000, or even $2,000, a mini-med policy is like a fire insurance policy that covers only the items on your front stoop. The real question addressed by the hearing was whether mini-med policies are "better than nothing."

Rockefeller, a West Virginia Democrat, tipped his hand at the start when he said, "I want to destroy that phrase before this hearing is over." But he wouldn't carry the thought to its logical conclusion: If mini-med policies are worse than nothing, then why on Earth did the Health and Human Services department flinch from putting them out of business by granting them temporary regulatory waivers? (The mini-meds remain scheduled for extinction in 2014, when health reform's state insurance exchanges replace them with real health insurance.)

Among hearing witnesses, Team Better-Than-Nothing was headed up by Rich Floersch, executive vice president for human resources at McDonald's Corp. McDonald's helped win itself a crucial waiver from the health reform law, Janet Adamy reported two months ago in the Wall Street Journal, by threatening to HHS that if forced to comply it might just have to withdraw health coverage from thousands of fast food workers.

McDonald's offers hourly workers at its 1,500 company-owned restaurants four health-insurance options, Floersch explained. Only one of these options (annual premium: about $6,000 per year, obviously more than most hourly workers can pay) is "comprehensive" (i.e., real) insurance. The other three are mini-meds. The cheapest option (and the one nearly all its hourly workers opt for) cost $710 per year in 2008 and had an annual benefit ceiling of $2,000. These same four options are also available from most of McDonald's' 12,500 franchisees.

Floersch said that McDonald's surveyed its employees and found only 10 percent willing to pay $21 or more per week for health insurance, as opposed to 55 percent who would be willing to pay $5 to $20 per week. He didn't mention (but a commerce committee fact sheet did) that the sliding premiums for the three insurance options available to corporate suits and some restaurant managers but not to hourly employees actually begin at levels below those paid by hourly workers for mini-med plans even though the suits' policies contain no annual benefit limits.

That's right. Some nonhourly employees at McDonald's pay less for their real health insurance — with no annual limits and, indeed, an employee out-of-pocket maximum of $4,000 for covered expenses — than the poor saps shoveling french fries and flipping Big Macs pay for fake health insurance with no employee out-of-pocket maximum for covered expenses. Oh, and the absolute highest health premium the suits might pay ($1,435 for higher-earning employees in the "no-deductible PPO") is less than a quarter the premium McDonald's expects the saps to pay for the only policy hourly workers can opt for that isn't a mini-med.

What are the saps getting for their money? The only substantive answer Floersch provided to that question was that when you buy mini-med McSurance you become eligible for "significantly reduced" drug prices and health care services that the insurer has managed to negotiate. That may actually have value for some people who require medication and doctor visits but never, ever, ever end up in the hospital. How much value would depend on how significant those discounts are; Floersch didn't say. Weighing against these unquantified discounts is McSurance's $150-per-person annual deductible and assorted co-pays, including a $50 co-pay for all brand-name drugs.

The thing to remember, Floersch emphasized, was that "approximately 90 percent of covered employees do not reach the annual limit for these benefits." Rockefeller answered with the analogy of a car whose brakes don't work 10 percent of the time. "Your brakes have to work all the time," he said, "or else you're not going to drive the car." The point he was trying to make, however awkwardly, was that it's no use saying insurance works out really well for the 90 or 98 percent of policyholders to whom disaster doesn't strike if it works out really badly for the 10 percent or 2 percent to whom disaster does strike, because the main reason we buy insurance in the first place (Duh!) is because we might end up being that 10 percent or 2 percent.

The hearing's unanswered question was whether HHS got snookered by granting mini-meds three more years of existence. If, as Rockefeller argued (and I'm inclined to agree) mini-med health insurance is not "better than nothing," then HHS had no reason to exempt it even temporarily from new requirements under health reform.

McDonald's is far from the only entity granted a temporary health-reform waiver by HHS. The Obama administration has been handing out waivers out like penny candy.

I asked Rockefeller: Was the mini-med waiver justified? "I think it's just a fact of life," he sighed. Then why hold a hearing at all? To embarrass McDonald's into giving its hourly workers a better deal on health care? Maybe. Me, I prefer regulation.

© 2010 Slate

McSurance that’s worse than nothing 12/02/10 [Last modified: Thursday, December 2, 2010 5:16pm]

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